Universal credit: refusing legacy = deprivation of capital?

Grumpy_chap

andrewmp said:

The 'golden rule' could possibly be applied in cases of absurdity such as the helicopter example? 

How would you define "absurdity"?

You seem to agree that an individual on means-tested benefits buying a helicopter on credit ahead of receiving an inheritance so that the inheritance can repay the debt and the individual retains access to means-tested benefits is absurd.

Swap "helicopter" for "Ferrari".  Is that absurd?

Swap "helicopter" for "Ford Focus".  Is that absurd?

Swap "helicopter" for "Rolex".  Is that absurd?

Swap "helicopter" for "Timex".  Is that absurd?

Swap "helicopter" for "Kruggerand".  Is that absurd?

Swap "helicopter" for "gold ring with solitaire diamond inset".  Is that absurd?

Muttleythefrog

Grumpy_chap said:

andrewmp said:

The 'golden rule' could possibly be applied in cases of absurdity such as the helicopter example? 

How would you define "absurdity"?

This would fall into the same camp as the 'reasonable' in legislation regarding DoC.. it relies on subjectivity and the individual's circumstances.
"purchasing goods or services if the expenditure was reasonable in the circumstances of the person's case."

andrewmp

Grumpy_chap said:

andrewmp said:

The 'golden rule' could possibly be applied in cases of absurdity such as the helicopter example? 

How would you define "absurdity"?

You seem to agree that an individual on means-tested benefits buying a helicopter on credit ahead of receiving an inheritance so that the inheritance can repay the debt and the individual retains access to means-tested benefits is absurd.

Swap "helicopter" for "Ferrari".  Is that absurd?

Swap "helicopter" for "Ford Focus".  Is that absurd?

Swap "helicopter" for "Rolex".  Is that absurd?

Swap "helicopter" for "Timex".  Is that absurd?

Swap "helicopter" for "Kruggerand".  Is that absurd?

Swap "helicopter" for "gold ring with solitaire diamond inset".  Is that absurd?

 No idea. It's very unlikely to happen anyway.

NedS

Muttleythefrog said:

Grumpy_chap said:

andrewmp said:

The 'golden rule' could possibly be applied in cases of absurdity such as the helicopter example? 

How would you define "absurdity"?

This would fall into the same camp as the 'reasonable' in legislation regarding DoC.. it relies on subjectivity and the individual's circumstances.
"purchasing goods or services if the expenditure was reasonable in the circumstances of the person's case."

Indeed, there are many such examples that are open to interpretation and ultimately fall to a magistrate or tribunal to make a legal judgement.

Disability and the Equality Act is another classic example. A person can consider themselves as disabled and thus protected under the Equality Act. An employer may consider that they do not meet the threshold of disability and therefore are not protected by the Equality Act. Each of which are opinions or points of view on the legislation. Only an employment tribunal can make a legal judgement on whether or not they meet the threshold for disability.

justwhat

You have to take the various scenarios and there intention into consideration. Creating "non essential/fabricated Debt" or  "out of character debt" i would think would fail at tribunal. If it could be proved.

Someone else buying you an asset is not DoC , eg someone else disposing of the capital on your behalf , were you have little control.  If you somehow have a track record of buying a new helicopter every year then its not DoC.

 You inherit 60k you are currently on UC. you put the hole 60k into a pension. i believe nothing can be done about that.

i am not sure what  would happen if you replace your possessions with new items. eg if you own a rolex and replace the rolex with a newer more expensive model. 

i am not sure what happens with a trust that is setup to drip feed an inheritance to the recipient. 

NedS

justwhat said:

You have to take the various scenarios and there intention into consideration. Creating "non essential/fabricated Debt" or  "out of character debt" i would think would fail at tribunal. If it could be proved.

Someone else buying you an asset is not DoC , eg someone else disposing of the capital on your behalf , were you have little control.  If you somehow have a track record of buying a new helicopter every year then its not DoC.

No and No. No one else can dispose of your capital as no one else should have access to it, unless they have POA and then they act on your behalf so it's still DoC.

Your helicopter example is just wrong. It fails the reasonable test - it is not reasonable expenditure for someone claiming means-tested benefits, regardless of whether or not they've bought a new helicopter every year for the last 10 years. That's probably why they've ended up claiming benefits as they've friviously spend all their cash on helicopters!

justwhat said:

 You inherit 60k you are currently on UC. you put the hole 60k into a pension. i believe nothing can be done about that.

This example is somewhat different. You cannot pay into a pension more than you earn, so to be able to pay a £60k inheritance into a pension you must be earning at least £60k, and if you are earning £60k per year, you will not qualify for means tested benefits (unless you are asking UC to deduct from your earnings each month at which point you'd still have the £60k lump sum and would not be able to pay it into a pension as you'd already paid in your salary each month so logistically it is just not possible).

justwhat said:

i am not sure what  would happen if you replace your possessions with new items. eg if you own a rolex and replace the rolex with a newer more expensive model.

Again, it would fail the reasonable expenditure test. It's not reasonable to purchase a Rolex when a Timex would do if you needed a new watch.

justwhat said:

i am not sure what happens with a trust that is setup to drip feed an inheritance to the recipient.

Only certain types of trust are disregarded, such as compensation payments for personal injury etc.

HillStreetBlues

NedS said:

This example is somewhat different. You cannot pay into a pension more than you earn, so to be able to pay a £60k inheritance into a pension you must be earning at least £60k, and if you are earning £60k per year, you will not qualify for means tested benefits (unless you are asking UC to deduct from your earnings each month at which point you'd still have the £60k lump sum and would not be able to pay it into a pension as you'd already paid in your salary each month so logistically it is just not possible).

You can pay whatever you want into a pension, there is no limit, but there is a limit on tax relief.

Muttleythefrog

justwhat said:

You have to take the various scenarios and there intention into consideration. Creating "non essential/fabricated Debt" or  "out of character debt" i would think would fail at tribunal. If it could be proved.

Fail in what regard.... because debt is not capital so there appears no issue there. It comes down to repaying it and as the legislation is written repayment of debt is never deprivation of capital. This is where the rules seem open to abuse even where the intent is clear to deprive of capital to retain or gain benefits.

There is the issue of "purchasing goods or services if the expenditure was reasonable in the circumstances of the person's case". One could consider using credit as expenditure.... however you can't deprive yourself of capital you don't have. So if someone spent £10k on a new watch using a credit card their declaration of capital would be exactly the same before and after the transaction unless the watch was considered capital but since it's a personal effect it probably wouldn't be. So the capital would be unchanged and then comes repayment of the debt presumably from windfall or inheritance etc. It's hard to understand therefore in a scenario like this how the unreasonable test would be applied to show DoC... unless notional capital is attributed to the debt created from the unreasonable expenditure (and if the rules were to change this is where I would make the change as it brings debt creation into line with standard spending for consideration of reasonableness).

If they used payment other than credit, such as with funds in their bank, it surely would be much more straightforward although there still would be questions to answer on motive and knowledge... there would be no issue of repaying debt.

I agree with above on the issue of someone else spending your money... that's either a criminal matter (someone using your account without your authorisation)... or would be treated as your spending one way or another (someone or you using your account with authorisation).

I also agree with above that habitually making particularly purchases while that may be considered would also be considered in the context of the individual's circumstances.... if someone had a habit of buying a new Sports car every 3 years while on their executor's salary but found themselves later on UC due to losing the job then they would be surely expected to adapt to those new circumstances and such spending be considered unreasonable (although caveat that if they used credit to purchase we end up in scenario above).

justwhat

Muttleythefrog said:

justwhat said:

You have to take the various scenarios and there intention into consideration. Creating "non essential/fabricated Debt" or  "out of character debt" i would think would fail at tribunal. If it could be proved.

Fail in what regard.... because debt is not capital so there appears no issue there. It comes down to repaying it and as the legislation is written repayment of debt is never deprivation of capital. This is where the rules seem open to abuse even where the intent is clear to deprive of capital to retain or gain benefits.

There is the issue of "purchasing goods or services if the expenditure was reasonable in the circumstances of the person's case". One could consider using credit as expenditure.... however you can't deprive yourself of capital you don't have. So if someone spent £10k on a new watch using a credit card their declaration of capital would be exactly the same before and after the transaction unless the watch was considered capital but since it's a personal effect it probably wouldn't be. So the capital would be unchanged and then comes repayment of the debt presumably from windfall or inheritance etc. It's hard to understand therefore in a scenario like this how the unreasonable test would be applied to show DoC... unless notional capital is attributed to the debt created from the unreasonable expenditure (and if the rules were to change this is where I would make the change as it brings debt creation into line with standard spending for consideration of reasonableness).

If they used payment other than credit, such as with funds in their bank, it surely would be much more straightforward although there still would be questions to answer on motive and knowledge... there would be no issue of repaying debt.

I agree with above on the issue of someone else spending your money... that's either a criminal matter (someone using your account without your authorisation)... or would be treated as your spending one way or another (someone or you using your account with authorisation).

I also agree with above that habitually making particularly purchases while that may be considered would also be considered in the context of the individual's circumstances.... if someone had a habit of buying a new Sports car every 3 years while on their executor's salary but found themselves later on UC due to losing the job then they would be surely expected to adapt to those new circumstances and such spending be considered unreasonable (although caveat that if they used credit to purchase we end up in scenario above).

I cant believe you can get rid of large amounts of money by using credit then paying it off. The system would be open to limitless abuse , if you wanted to use that particular loophole/rule.  Mind you.... Do you actually ever get asked how the debt was created  when you make a credit repayment? 

" someone else spending your money" - sorry not very well explained. As an example , An executor providing an asset rather than a cash equivalent.

Muttleythefrog

justwhat said:

Muttleythefrog said:

justwhat said:

You have to take the various scenarios and there intention into consideration. Creating "non essential/fabricated Debt" or  "out of character debt" i would think would fail at tribunal. If it could be proved.

Fail in what regard.... because debt is not capital so there appears no issue there. It comes down to repaying it and as the legislation is written repayment of debt is never deprivation of capital. This is where the rules seem open to abuse even where the intent is clear to deprive of capital to retain or gain benefits.

There is the issue of "purchasing goods or services if the expenditure was reasonable in the circumstances of the person's case". One could consider using credit as expenditure.... however you can't deprive yourself of capital you don't have. So if someone spent £10k on a new watch using a credit card their declaration of capital would be exactly the same before and after the transaction unless the watch was considered capital but since it's a personal effect it probably wouldn't be. So the capital would be unchanged and then comes repayment of the debt presumably from windfall or inheritance etc. It's hard to understand therefore in a scenario like this how the unreasonable test would be applied to show DoC... unless notional capital is attributed to the debt created from the unreasonable expenditure (and if the rules were to change this is where I would make the change as it brings debt creation into line with standard spending for consideration of reasonableness).

If they used payment other than credit, such as with funds in their bank, it surely would be much more straightforward although there still would be questions to answer on motive and knowledge... there would be no issue of repaying debt.

I agree with above on the issue of someone else spending your money... that's either a criminal matter (someone using your account without your authorisation)... or would be treated as your spending one way or another (someone or you using your account with authorisation).

I also agree with above that habitually making particularly purchases while that may be considered would also be considered in the context of the individual's circumstances.... if someone had a habit of buying a new Sports car every 3 years while on their executor's salary but found themselves later on UC due to losing the job then they would be surely expected to adapt to those new circumstances and such spending be considered unreasonable (although caveat that if they used credit to purchase we end up in scenario above).

I cant believe you can get rid of large amounts of money by using credit then paying it off. The system would be open to limitless abuse , if you wanted to use that particular loophole/rule.  Mind you.... Do you actually ever get asked how the debt was created  when you make a credit repayment? 

" someone else spending your money" - sorry not very well explained. As an example , An executor providing an asset rather than a cash equivalent.

It seems to be the case... open to widespread abuse. The lack of case law is likely in my opinion because the answer to your question is probably rarely if ever... and because paying debt is not considered deprivation. In the ongoing random checks 'to see if people are receiving the right level of UC' they ask to see 4 months of statements (accounts with capital) but I'm not aware of anyone being asked typically for credit card statements even where those other statements show payments to credit card companies... and probably because debt is not considered capital (and indeed does not hold a value to subtract from other capital..i.e. it isn't considered negative capital). So the simple reality is probably that the vast majority of DoC suspicious cases never even come to attention of the DWP. It's probably also a factor that most people on UC by definition will not have great resources to fiddle with... unless they have things like an inheritance or other rare events occur.

In terms of estates obviously executors should carry out what the will instructs.

Ultimately fallible people create systems.. rules... laws.. processes... and not always with great clarity or cleverness. Where people are willing to find ways to use systems to their advantage they may invariably achieve it... including by finding ways to achieve things the system may be intended to prevent.